Manufacture test in excise law: converting waste PET bottles into PET flakes did not create a new commercial commodity.

Conversion of waste PET bottles into PET flakes was held not to amount to manufacture under section 2(f) of the Central Excise Act, 1944. Applying the settled test, the process must result in a new and different article with a distinct name, character, or use; mere sorting, crushing, washing, rinsing, drying, and packing, where the essential identity of the goods remains unchanged, is insufficient. On the stated facts, the end product continued to be PET flakes and no new commercial commodity emerged. Excise duty was therefore not leviable, and internet-based material was rejected as an unsuitable basis for determining chemical change.

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Issues: Whether the conversion of waste PET bottles into PET flakes amounts to manufacture under section 2(f) of the Central Excise Act, 1944.

Analysis: The process involved sorting out non-PET materials, crushing the waste bottles into flakes, washing, rinsing, drying, packing, and clearing the product. The settled test for manufacture is whether the process brings into existence a new and different article having a distinctive name, character, or use. Mere change in form, removal of impurities, or processing that leaves the essential identity of the goods intact does not amount to manufacture. On the facts, the end product remained PET flakes and no new commercial commodity emerged. The reliance placed on internet sources to infer chemical change was rejected as unsuitable for legal determination.

Conclusion: The process did not amount to manufacture, and central excise duty was not leviable on the PET flakes.

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